CALGARY, Sept. 29 /CNW/ - Galleon Energy Inc. ("Galleon") announces continued drilling success during third quarter 2008.

Drilling highlights:
  - In third quarter 2008, Galleon drilled 33 wells and cased 31 wells
    (29 net) for production; a success rate of 94%. Eleven wells (9.5
    net) were cased for light oil and 19 wells (18.6 net) were cased for
    natural gas. One well (1.0 net) was cased as a water injector.
  - In third quarter 2008, 6 Montney horizontal wells (100% interest)
    were drilled in the Eastern Montney project. Five of these wells have
    been completed with multi staged fractures and are on production. One
    well is waiting on completion.
  - As previously announced, Galleon drilled an important Montney
    horizontal well (77% interest) in BC during Q3 2008. The well is
    currently in an extended test period and has flowed at approximately
    370 BOE/d gross throughout a three day period.
  - A significant Montney horizontal well (100% interest) was completed
    in the Central Montney project in July 2008. This well has been on
    production for 2 months and production remains stable at
    approximately 3.1 Mmcf/d and 20 Bbls/d of oil.
  - In third quarter 2008, the light oil drilling program was successful
    including 6 light oil wells in the McLeans Creek area.
  - Six rigs are currently drilling including two Montney horizontal
    targets.

Galleon is on track to achieve one of its 2008 strategic goals of growing its position in the Montney resource base. Strong economics have been proven for horizontal wells with multi staged fractures in the Eastern Montney fairway. The viability of new Montney plays in BC and in the Central Montney fairway have also been proven. Although we are in the early stages of applying relatively recent advances in horizontal completion techniques, Galleon sees wide ranging application of this multi stage fracture technology to its many projects. In addition, the strength of Galleon's light oil portfolio has been demonstrated through consistent drilling success.

Eastern Montney Project Update

The Eastern Montney natural gas pool represents a significant resource to Galleon. This project has seen production grow to 3,987 BOE/d (22.1 Mmcf/d of natural gas and 304 Bbl/d of light oil) today from 333 BOE/d (2 Mmcf/d of natural gas) in June 2005. This is currently Galleon's largest producing area.

The recent production growth is primarily due to horizontal drilling technology and advancement in completion methods. Nine horizontal wells are currently producing, in aggregate, 1,687 BOE/d (9.4 Mmcf/d of natural gas and 128 Bbl/d of light oil), exceeding Galleon's expectations. The production data suggests that horizontal wells have a higher production profile (2 to 5 times better) and lower initial production decline rates than the vertical wells. The horizontal drilling technology has positively changed the development strategy of the Eastern Montney project. Galleon intends to continue with this method of exploitation.

To date, the economics of the horizontal wells have proven to be better than the vertical wells on a rate of return and reserve optimization basis. The average cost of each horizontal well (including fracturing and tie in) is $1.3 million compared to the average cost of $0.8 million for each vertical well. Horizontal well payouts are expected to be less than one year based on current production rates, commodity prices, royalty rates and operating costs.

Galleon plans to drill up to 24 Montney horizontal wells in 2008, of which 10 wells have been drilled. Up to fourteen wells will be drilled in Q4 2008 by using 2 to 3 drilling rigs. There are currently 38 horizontal locations in the drilling queue and clear vision to another 50 horizontal locations in the main core under current spacing regulations. There is potential for another 200 horizontal locations within the mapped boundaries of the pool.

Currently, Galleon owns a 30 Mmcf/d gas plant (100% interest). An expansion to 33 Mmcf/d (100% interest) is planned in Q4 2008. A new 10 Mmcf/d gas plant (100% interest) is planned in Q1 2009 and scheduled to be operational in early Q2 2009. Total natural gas processing capacity will then be approximately 43 Mmcf/d in this project.

To date, Galleon has drilled over 80 vertical wells and 10 horizontal wells in the Eastern Montney project. The wells are located throughout an area covering 35 miles in length and 12 miles in width. Galleon has access to approximately 313,000 gross acres of land with Montney potential.